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Actuate Corporation (NASDAQ:ACTU)

Q1 2008 Earnings Call

April 28, 2008 5:00 pm ET

Executives

Peter I. Cittadini – President and Chief Executive Officer

Daniel A. Gaudreau – Chief Financial Officer

Thomas McKeever – General Counsel

Analysts

Justin Cable – Global Hunter Securities

Frank Sparacino – First Analysis

Kevin Liu – B. Riley & Company, Inc.

T. J. Laverty – Colcott Capital

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q1 Financial Year 2008 Actuate Corporation’s Earnings Conference Call. (Operator Instruction)

I would now like to turn the conference over to General Counsel, VP of Corporate Development, Mr. Thomas McKeever. Mr.McKeever, you may begin your conference.

Thomas McKeever

Thank you very much and welcome everyone to Actuate’s First Quarter 2008 Financial Results Conference Call. I’ve Tom McKeever, Actuate’s General Counsel, and joining my today is Pete Cittadini, our President and CEO, and Dan Guadreau, our CFO.

Before we get started, I understand there’s a problem with the press release being posted on Yahoo, for those of you who are looking there. It is on Google’s web site as well as our own Investor Relations web site. So if you’re having trouble finding it, you might check with those other two sources. So let’s get started with the Safe Harbor.

I would like to remind everybody that the statements contained in the presentation that they are not purely historical are forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These include statements regarding Actuate’s expectations, beliefs, hopes, intentions or strategies regarding the future. All such forward-looking statements in this presentation are based upon information now known by Actuate and Actuate disclaims any obligation to update or revise any such forward-looking statements based on changes in expectations or the circumstances or conditions on which such expectations may be based. Actual results could differ materially from Actuate’s current expectations. Factors that could cause or contribute to such differences include, but are not limited to, the general spending environment for information technology products and services in general and business intelligence, rich Internet application, Performance Management software in particular, quarterly fluctuations in our revenues and other operating results, our ability to expand our international operations, our ability to successfully compete against current and future competitors, the impact of acquisitions on the company’s financial and/or operating condition, the ability to increase revenues through our indirect distribution channels, general economic and geopolitical uncertainties, and other risk factors that are discussed in Actuate’s Securities and Exchange Commission filings, specifically Actuate’s Annual Report on Form 10-K for the 2007 fiscal year filed which was filed on March 17, 2008, and quarterly reports on Form 10-Q that were filed on May 10, August 9, and November 9, 2007.

I would also like to advise everyone that during this call we will be discussing certain financial measures that have not been calculated in accordance with generally accepted accounting principles, or GAAP. The non-GAAP financial measures such as non-GAAP operating margin percentages, non-GAAP net income, and non-GAAP earnings per share are presented as a supplement to, and not a substitute for, our GAAP financial results.

This afternoon’s press release contains a complete set of GAAP financial results, as well as the reconciliation between our GAAP and non-GAAP results. That press release is posted on the Investor Relations section of our web site at www.actuate.com.

I would also like to note that this call is being web cast live on our Investor Relations web site, accompanied by a set of slides and will be available on an archive basis for a limited time following the call.

Now I would like to turn the call over to Pete.

Peter I. Cittadini

Okay. Thank you, Tom, and good afternoon ladies and gentlemen. If you’re following along with slides or on the web cast, I’m going to be starting off on Slide 4. So let’s get started with our first quarter summary.

In Q1 top line revenue ended up at $29.5 million, license revenue or $7.6 million with non-GAAP EPS of $0.02 per share. Before I get to the fourth bullet, let me make a comment. Even though we would have preferred closing Q1 with a different set of numbers, our 2008 forecast to our shareholders stands as of the last conference call. Of course, you will see within the confines of Q1 we had a record $12.2 million of cash flow from operations. So again, very, very solid financial footing going forward for Actuate Corporation.

Moving on to Slide 5, hopefully you’ll get a little comedy in the cartoon because the environment’s not that comedic right now. However, it’s associated with what’s really going on from a macro standpoint in the market. And as you know, we had a great 2007 and at the Q4 earnings call sort of set the stage for a tougher first half of 2008. And that clearly is the case. What originally started out as a sub-prime issue and a credit crunch issue in February went to auction rate securities, default loans, the Bear Stearns debacle—it just keeps getting interesting. So, clearly, we continue to see the negative psychology associated with spending against the budgets, we believe, for the first half of 2008.

What’s sort of worse is some of the large firms that aren’t as bad off—and what I’ll try to do is incorporate a Q1 story to give you some context. It will also explain the set of numbers that I just reviewed with you—but some of the larger firms that aren’t as bad off are also trying to take advantage of the current situation within the financial services sector.

So, indeed, we’ve said in the past, Actuate is an investment that you’ll enjoy making because of our principles and discipline against those principles associated with our business model. One of the things that transpired in Q1 was a firm that was fairly well off trying to take the situation that was a seven-figure transaction. They tried to hold us up for what we thought were inappropriate terms for Actuate Corporation and they would have given us the order within the confines of the quarter, however, having such a long-term trajectory at our company—and again, all backed by principles and disciplines—we said, “Thanks, but no thanks.” Which would have materially changed the numbers that we just relayed to you for the quarter.

I think that’s good news, that you continue investing in a company and the management team that does the right thing for the long-term opportunity. There’s even more good news. As of last week we secured that order, with the appropriate terms for our company on a going-forward basis. So, once again, it’s a shame that probably lots of CEOs, CFOs, and VPs of sales are succumbing to strong-arm tactics under the guise of, “Things are tough, thus your pricing has to come down dramatically.”

We think it basically just really, really hurts the industry in general, however, if you’re a shareholder and you like the way we’re operating, our commitment to you is that we will continue to operate this way. So again, a missed large opportunity in Q1, for all the right reasons. We have secured it and it is in hand for Q2 already at the appropriate Actuate-based terms.

Moving on to Slide 6, you’ll see first quarter transactions. It continues to be very blue-chip, a bit more horizontally-oriented, and OEM continues to be a good contributor. As a matter of fact, our open-source strategy with BIRT, I believe will be a substantial accelerant in the OEM business on a going-forward basis.

The other thing I’ll share with you, associated with the first quarter transactions, is we did do 50% of our overall business out of the financial services sector and 50% of our revenues also and outside the firewall extranet applications. That again is a highly differentiated application type for Actuate versus the rest of traditional BI suppliers.

Moving on to Slide 7, this is what is really taking hold at Actuate and in the market associated with our company. It’s the whole, open-source conduit to a very large market share of developers and you’ll see that BIRT has now exceeded 3 million in total downloads during the course of the quarter. So that is indeed right—if you do your math, we did approximately 1 million downloads alone within the confines of Q1. And that’s fantastic.

One of the things that we analyzed and the data that we’re able to get our hands on was that a substantial amount of the downloads were associated with the engine part of the product instead of the designer part of the product. That means that people are going into initial phases of deployments of BIRT-based applications. That’s a prerequisite for additional products and services form Actuate to that community. So we’re thrilled there.

The other piece of thrilling piece of information was that we exceed $2.5 million of business associated with our open-source strategy and BIRT-related business during the confines of the quarter. And that, for those of you who remember, is up from $1 million in Q1 of 2007. You’ll see the graph; it’s a very nice up and to the right graph and the great part about the start of Q1 for Actuate Corporation is, again, we do expect to meet and exceed that $16 million of BIRT-based business for 2008, which would be a double year-over-year based on our $8 million in 2007.

Moving on, I want to give you a little bit more color and granularity associated with BIRT-Exchange. Again, this is our web site that’s complimentary to the Eclispe.org web site and I have, over the next two slides, five views for you that will show you the up-and-to-the-right performance that we’re experiencing with BIRT-Exchange. The first one shows you that in the month of March we hit an all-time high of 13,000 visitors to the site. As far as registrants on the site, 750 for the month of March. And again, the bar charts show reality.

Moving on to Page 9, you look at commercial downloads. We hit an all-time high of 1,000 within the confines of March. When you look at accesses to demonstrations, 3,000 in March. Again, an all-time high. And then finally dev share accesses which is the community forums, blogs, and communication vehicles, if you will—11,000 within the confines of the month of March. So again, as far as BIRT-Exchange being a paramount part of our open-source strategy, all moving in the right direction.

Moving on to Slide 10, we just want to reiterate what our company and technology stat does. Again, BIRT is the development environment which will have the largest market share of rich Internet application developers through Eclipse developers, Java developers, PHP developers, as well as other web-based developers and we’re seeing that, again, with the 3 million downloads to date.

Create the application with BIRT, deploy it with Actuate’s iServer, or iServer Express, our deployment platforms. What you get is a culminated rich Internet application without limits, which is a complete web tool application which allows for rich visualization and interactivity of transactional data.

And of course these rich Internet applications come in two flavors: an intranet flavor, which is primarily and BI and performance management application, and a highly differentiated customer loyalty application, which is the typical extranet, or consumer-based self service application which reaches outside of a company’s firewall to build customer loyalty. And this is the type of application, again, very unique to Actuate Corporation, and drove approximately 50% of our overall business within the confines of Q1.

These applications are also why Actuate’s maintenance stream and recurring maintenance stream is so sticky. We’re clearly building applications that are not luxury items within very large Global 9000 firms. They’re all mission-critical to running their day-to-day operations. Thus, you’ll be very, very pleased with what Dan has to say with maintenance renewal revenues and maintenance revenues in general.

All right. Moving on to Slide 11, which is next to the final slide, again, elements of our new hybrid enterprise software slash open-source model that includes and expanding global market, accelerated revenues and accelerated profits by reducing the sales and marketing costs. Clearly, what you see from our company thus far, and even within the confines of Q1, is extremely strong cash flow from the business. Substantial and growing maintenance revenues, increasing services margins, gaining dramatic momentum in open-source market share for our product line, BIRT, and we also have an open-source group internally that sort of markets to that open-source community. And their financial performance was at all-time high, if you will, within the confines of Q1.

So, for outsiders looking in, if you’re not cognizant of what we’re transitioning to, a lot of this information is not that intuitive. However, the important thing that continues to make Actuate one of the best investments in the tech market is we’re not standing still as most enterprise software companies are, that are tightly tied to the financial services sector. There is a lot of forward progress being made that’s extremely tangible in the marketplace even though it may not be evidenced by the numbers, specifically in Q1. But we’re clearly seeing, as a management team, that all of this footing and foundation is going to be instrumental in capitalizing on revenue growth and profitability growth once the financial services cycle sort of clears out and moves to the right side of the fence.

So, again, all of this information that I’m giving you associated with our open-source strategy—the BIRT downloads, the incremental BIRT-driven revenues—is essential to our company and to our shareholders because when it turns, as I said, on the right side of the fence and these large global financial institutions get rid of the negative psychology for positive psychology, as you know, they continue to spend and push the envelope on innovation through automation, and that will be the day when the numbers dramatically align with the strategy. We don’t believe that’s far off and maybe we’ll give you some commentary on that in the Q&A part of this afternoon’s presentation.

Moving on to the final chart, you’ll just see our reiteration of 2008 guidance. Total revenues of approximately $140 million, license revenues at $48+ million, so it could be down as much as 10% year-over-year. Non-GAAP EPS approximately $0.33, flat with 2007. And non-GAAP operating margins at approximately 20%-21% for the year.

So with that I would like to hand it over to Dan.

Daniel A. Guadreau

Thanks, Pete.

So besides the Yahoo snafu, I am being told that you are not able to sequence the charts, unfortunately. So I’ve also been told to fix that if you hit the “refresh” button after every chart it will, in fact, sequence them. Give it a shot.

Okay. The summary for the first quarter 2008, total revenues for the first quarter totaled $29.5 million. That was down $2.5 million from the $32 million recorded in Q1 2007. License revenues totaled $7.6 million in Q1, while Cirrus’s revenues aggregated almost $22 million for the quarter. Non-GAAP operating income totaled $2 million with a corresponding operating margin of about 7%. Non-GAAP earnings per share totaled $0.02 compared with $0.05 a year ago. GAAP earnings per share were $0.04, up 100% from Q1 2007. From a cash flow standpoint, we started off the year strong with a record $12.2 million cash flow from operations.

Slide 15. On the left side of this chart is a three-year history of our revenue growth. Our revenues grew 2%, 21%, and 9% during the years 2005, 2006, and 2007 respectively. However, at the end of 2007 we were impacted by the slow down in financial services. At that time, because of the malaise in the financial services sector, we told the public that we anticipated total revenues to be flat for 2008, with a weak first half and a stronger second half. We experienced that weakness, as shown on the right chart. Overall, revenues were down 8% in Q1.

Also at our last conference call we said that international revenues continued to grow in double digit throughout 2007 and that the issues were primarily in the U.S. Although we have seen signs of weakness in the international financial sector, total international revenues grew nicely in Q1 by 20% but couldn’t offset the 19% decrease in the U.S.

Slide 16. This is a history of the services revenue growth. On the left side of this chart is the three-year history. Our services revenues grew 12%, 17%, and 7% during the years 2005, 2006, and 2007 respectively. Product maintenance and support revenues have grown 16%, 20% , and 13% over the same three-year period. On the right side of the chart, for Q1 of 2008 compared with Q1 of 2007, both professional services and product support revenues grew 10% year-over-year. We have sharpened our focus in both of these areas and implemented new programs that should support good future growth.

Slide 17. Other Q1 highlights. As I mentioned before, international revenues grew 20% year-over-year and increased to 36% of total revenues for the quarter. We closed transactions greater than $100,000 with 68 customers. We also closed one deal in excess of $1 million. Non-GAAP services margins at 73% in Q1, a 300 basis point improvement from a year ago. Non-GAAP operating margin or Q1 was 6.8% and was down from first quarter of 2007 primarily as a result of the revenue decline. Operating expenses were slightly down from a year ago and we will continue to hold expenses in check until we see a rebound in the financial services sector.

Foreign exchange hurt both our GAAP and non-GAAP earnings by a $0.01 this quarter, from paper-translation losses. Our Swiss headquarters, which has a Swiss franc functional currency holds large net asset balances in other foreign currencies, primarily the pound and the dollar, and some in Euros as well. Upon translation into Swiss francs, we had to book approximately $1.2 million in foreign exchange losses to the P&L. However, upon consolidation at the Actuate Corporation, the Swiss entity that is, into the Actuate Corporation, the offsetting gain was recording to the CTA account, which is Currency Translation Account, on the balance sheet in accordance with U.S. GAAP. So what hit the P&L on translation when the Swiss operation hit the balance sheet upon consolidation into the U.S. Paper loss.

Next chart. 18. Cash and investments totaled $72.8 million as of March 31, 2008, an increase of $3.8 million from a year ago and $4.4 million from December 31, 2007. Included in the $72.8 million balance was $15.7 million in auction rate securities, which I’ll discuss shortly. Accounts receivable ended the quarter at about $22 million, down $0.5 million from a year ago and down almost $17 million sequentially. Cash collections were exceptionally strong in Q1. Deferred revenue totaled $43.5 million at the end of the quarter and that was an increase of $1.6 million or 4% from March 31, 2007.

Slide 19. Cash flow from operations totaled $12.2 million for Q1. This was our strongest cash flow quarter ever. Day sales outstanding ended the quarter at 67 days and that compares favorably with the 91 days we had at the end of 2007. As we stated in our Q4 2007 conference call, we accelerated our stock buy-back in Q1 to $10 million compared with the previously Board-approved $6.25 million per quarter. We ended the quarter at 584 employees, that was down 5 from year end 2007.

In the next couple of slides we will talk about our auction rate securities, so Slide 21. As I mentioned, we have $15.7 million of auction rate securities. They are on our balance sheet reported as long-term investments. All of our auction rate securities are AAA rated, held in reputable municipal entities, student loan backed, and federally guaranteed. None of the auction rate securities are on credit watch or have a negative outlook by rating agencies. And based on the Q1 2008 interest income we’re earning an annualized 5.2% rate of return.

Slide 22. So the majority of brokers that we’ve talked to, and we hear through our broker, believe that the situation is temporary. That is, it should be resolved in the next 16-18 months. Some issuers are currently in the process of restructuring their debt. We have documentation regarding the states of New Jersey, Montana, and Oregon specifically. However, as a conservative measure, we reduced the investment on our balance sheet by $700,000 by way of a write-down to equity in accordance with GAAP.

Slide 23. As Pete pointed out, we are reaffirming our guidance for 2008 that we gave at our last conference call. Total revenue should be approximately $140 million, license revenue at $48+ million, non-GAAP operating margin approximately 20%-21%, and non-GAAP earnings per share of approximately $0.33. As we mentioned at the end of January we expected a soft first half of 2008 and a stronger second half. Our pipelines have grown from a year ago and we believe we have sufficient activity to make our revenue targets. Operating expenses will be held flat to slightly down, ensuring a non-GAAP operating margin of 20%-21% and a non-GAAP earnings per share of approximately $0.33 at the $140 million revenue level.

And the final slide is that we will be at two conferences in the month of May: JMP Securities in San Francisco at the Ritz on May 20, and the Cowan conference at The Palace Hotel in New York on May 28th. And we would love to see you at that time.

That ends our formal remarks. We now open it up to Q&A.

Question-and-Answer Session

Operator

(Operator Instructions)

Our first question comes from the line of Justin Cable with Global Hunter.

Justin Cable – Global Hunter Securities

Thank you. Guys, I wanted to go back to Slide 9 here that gives some of the BIRT metrics. Typically around the commercial downloads and wanted to see if we could get any kind of range in pricing, or just more granularity, into what you are seeing downloaded on the commercial side here.

Daniel A. Guadreau

Justin, it is every thing from BIRT on our site to the deployment engine to iServer Express, which was a new mid-scale work group deployment environment that we launched in January, at the beginning of Q1. So as far as the breakdown specifically of those three products, I don’t have the specific breakdown, but obviously a lot of people are looking at iServer Express.

Justin Cable – Global Hunter Securities

Okay. And of these downloads, these are actually for a license fee?

Daniel A. Guadreau

No, no. These are downloads of commercially available product, they’re all downloaded with a 90-day evaluation period. You can then make up your mind whether you want to buy it or not.

Justin Cable – Global Hunter Securities

Okay. So if I look back at the total aggregate amount of revenues generated from BIRT, how many transactions does that represent? Or how many customers would that represent?

Daniel A. Guadreau

That’s a good question but I don’t have the answer off the top of my head to, but I would say that’s it’s probably in the 50-75 range.

Justin Cable – Global Hunter Securities

In terms of number of transactions?

Daniel A. Guadreau

Number of transactions, that is correct.

Justin Cable – Global Hunter Securities

And another piece of detail that might also be helpful for us is to know how much of that has been from existing customers of the Legacy Actuate products versus brand new customers?

Daniel A. Guadreau

A lot of it would be BIRT-based applications in customers that already exist. When you look at analyzing what drove the majority of the $2.5+ million. However, if you look at the majority of the transactions, they come from new clients that are not Legacy client of Actuate.

Justin Cable – Global Hunter Securities

Okay. And out of that $2.5 million, it that primarily just license revenues?

Daniel A. Guadreau

No, that’s complete revenue. License, service, and professional services.

Justin Cable – Global Hunter Securities

Can we get a breakdown at all?

Daniel A. Guadreau

Not at this point.

Justin Cable – Global Hunter Securities

Okay. Last question before I hop off here. The guidance to maintain the license revenue this year would basically imply kind of a quarter run rate of about $13 million in license revenues. I guess is there any more details or any more granularity that you can provide that would make us more comfortable with that number?

Peter I. Cittadini

Well, as you know, we said we were going to have a soft first half and a better second half. And if I recall correctly, both Q2 and Q3 of last year were in the $14+ million range on the license line. No more granularity other than based on what we have in hand with the transaction we secured that we decided not to take them up on their counter-proposed terms within the confines of Q1 plus looking at the pipeline and understanding the viability of that pipeline over the next three quarters—obviously no guarantees—we feel very confident that we can do the $48+ million in license revenues.

Justin Cable – Global Hunter Securities

Actually one last real quick question here. What was the next financial services revenues in the quarter?

Daniel A. Guadreau

It was approximately 50% in this quarter.

Justin Cable – Global Hunter Securities

Is that for both licenses and services or just licenses or all together?

Daniel A. Guadreau

For license.

Justin Cable – Global Hunter Securities

Okay. Great. Thank you.

Operator

Our next question comes from the line of Frank Sparacino with First Analysis.

Frank Sparacino – First Analysis

Hi, guys. Pete, just wanted to go back to BIRT for a second. If you looked at the composition of the BIRT revenue this year versus a year ago in terms of product, has it changed meaningfully?

Peter I. Cittadini

What do you mean by that, Frank?

Frank Sparacino – First Analysis

Well, in terms of—and I’m not sure you can actually determine from a deployment perspective; I assume you can from what products they are deploying but obviously they’re designing within the BIRT environment—but in terms of how they’re actually deploying, do you have a sense as to what the trends are there?

Peter I. Cittadini

Well, the biggest trend and data associated with that trend is the amount of engines being downloaded within the confines of Q1. We’ve not seen as many engines being downloaded in past quarter, thus that tell us that, again, a lot of what these developers have been doing with BIRT are ready for deployment phases of those applications. So that is one rather fundamental change in downloads. If you looked at the early downloads they were primarily the designer. And when the designer starts transitioning to healthier doses of the deployment engine, which again, is a free product, and again, easily downloadable at either the Eclipse site or the Actuate site, we thought that that was noteworthy and thus broke it out as a tangible difference in 2008, specifically Q1.

Frank Sparacino – First Analysis

Okay. And then my last question, Dan, on the international side, I mean, obviously you had good growth there, but did you see weakness in certain geographies or certain particles on the international side or was that sort of business as expected?

Peter I. Cittadini

Well, as Dan said, the number is at an all-time high but you have to keep it in context-- right? It’s against a rather weak North American number, if you will. When we look at the international business, and I’ll have Dan chime in here as well, we probably saw some degradation in international client up tick versus 90 days ago. And a lot of it, again, is our focus. We focus on the multi-national large global financial services companies. A lot of them are U.S.-based, as you know, with substantial operations outside of the U.S. And there the projects are in sort of the same holding patterns, if you will—budgeted for but because of negative psychology reluctant to pull the trigger on further investment associated with those projects in the short term because of their own earnings scenario.

Frank Sparacino – First Analysis

Dan, do you have anything to add to that?

Daniel A. Guadreau

No, I think the hit it on the head. I would say that I guess we have seen weakness in terms of our ability to close business, so some business is pushed. But not to the level that we saw Q4 in the United States. Let’s put it that way.

Frank Sparacino – First Analysis

Okay. Thank you, guys.

Operator

(Operator Instructions)

Our next question comes from the line of Kevin Liu of B. Riley & Company.

Kevin Liu – B. Riley & Company, Inc.

Good afternoon. First question on the SG&A. I know it’s up from Q4 of last year and I think last year you guys had also had some duplicate run expense in there so we’re just wondering kind of why that number was higher and what we should expect going forward?

Peter I. Cittadini

The primary reason why that would be higher is because of [inaudible] class. That’s when all the accounting fees for all the [inaudible] would kick in. In Q1. Also, Kevin, the other thing is we also expense all our Board fees. Our Board of Director fees. So that’s generally why that would be up sequentially.

Kevin Liu – B. Riley & Company, Inc.

I see. But then in terms of—really that number was probably a few hundred thousand higher than the prior year, so that would be kind of normalized range that you guys typically see?

Peter I. Cittadini

About 3.6? Somewhere in that neighborhood?

Kevin Liu – B. Riley & Company, Inc.

Yes.

Peter I. Cittadini

3.7?

Kevin Liu – B. Riley & Company, Inc.

Yes.

Peter I. Cittadini

Somewhere in the 3.6-3.7 range would be normal.

Kevin Liu – B. Riley & Company, Inc.

Okay. And then going back to the license revenues, in terms of the mix you guys said you saw 50/50. I’m trying to clarify from financial services versus the other verticals. Has there been any change in what you sort of expect for the remainder of the year?

Peter I. Cittadini

No. Again, we stay steadfast and focused on financial services, we continue to believe this is a short-term issues. To recalibrate everything and focus it on another vertical would not be the appropriate thing for us to do at this point.

Kevin Liu – B. Riley & Company, Inc.

And then in terms of the performance management product, I think the press release had a pretty nice growth there. Is that primarily still out of the public sector or are you seeing maybe your product offerings gain some traction like the other verticals?

Peter I. Cittadini

Primarily out of public sector but they are getting a bit more horizontal themselves. But again, they are focused and their proactive nature in marketing campaigns is all targeted toward public sector.

Kevin Liu – B. Riley & Company, Inc.

Thank you. And then, relative to BIRT—I mean, with the start to the first quarter, $2.5 million there, and then it looks like you guys are expecting a pretty nice up tick in revenues as we go along. Why do you guys have so much visibility in kind of that number and knowing that you’re going to get that $16 million there?

Peter I. Cittadini

We’re just looking at the trends and the trends are all extremely positive. You know, we do have a pipeline of BIRT-related business, we understand what parts of the pipeline are BIRT-based applications versus ERD Pro applications so that all give us comfort levels, if you will, on obtaining the $16 million for 2008.

Kevin Liu – B. Riley & Company, Inc.

I see. Okay. And then, just lastly on the share buy-back. You guys did $10 million last quarter and I know that’s authorization going forward. Is there a specific number of shares that are left out there to repurchase or are you free to spend that $10 million per quarter as you move forward in 2008?

Peter I. Cittadini

No, we have not been authorized to go to $10 million in this quarter. We’re back to the $6.25 million.

Kevin Liu – B. Riley & Company, Inc.

I see. Good. Thanks a lot.

Operator

(Operator Instructions)

Our next question comes from the line of T.J. Laverty with Colcott Capital.

T. J. Laverty – Colcott Capital

Hi, guys. I like the presentation this quarter. Did you say that pipeline was up year-over-year from this time last year and can you maybe elaborate a little bit more on geography and/or products, where it’s up the strongest and where it’s the weakest? Referring to pipeline only.

Daniel A. Guadreau

I won’t give you numbers but I’ll give you some direction, how’s that? The pipeline clearly is up from a year ago. It is up across the board, so domestically and internationally. And it is up similarly enterprise business versus the performance management business. And the Java, or the open-source business is way up, as evidenced by the numbers that Pete was talking about. We’re seeing improvement across the board across all products and across all geographies. In terms of pipeline.

Peter I. Cittadini

T. J., this is Pete. I just want you to keep it in perspective. Everyone has intentions on doing these projects, doing these facelifts on currently existing Actuate projects. So the pipeline naturally is going to escalate. The issues that we have, as evidenced by the Q1 numbers, is getting people to pull the trigger on the budget associated with those projects. So, again, it’s not the classic case of pipelines are growing and performance associated with the license line is growing—pipelines are growing because people are reticent and unclear on the timing with which they can separate with the cash associated with the requirement of buying additional Actuate software for their projects. Just wanted to be clear on that.

T. J. Laverty – Colcott Capital

Okay. And the next question was it looks like the services part of the maintenance and services revenues was up 10% in the first quarter. Is that--should we be expecting consulting services to be growing at 10% rate? Because it did slow down last year.

Daniel A. Guadreau

I would say—I think we gave guidance last year in the low to mid-single digit rate. I would still stay with that from a conservative perspective. But we are—I will tell you that there’s a lot more focus in that area than there has been in the last year or so.

T. J. Laverty – Colcott Capital

And why is there more focus?

Daniel A. Guadreau

New team, new executive there.

T. J. Laverty – Colcott Capital

Oh, okay. Great. Thanks a lot.

Operator

There are no further questions at this time. Mr. Cittadini, are there any closing remarks?

Peter I. Cittadini

No, other than thank you for everyone’s attention and participation and we look forward to seeing you at the next earnings call. Thank you.

Operator

Thank you for participation in today’s Q1 2008 Actuate Corporation’s earnings conference call. You may now disconnect.

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Source: Actuate Corporation Q1 2008 Earnings Call Transcript
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